Alistair Darling's future as Chancellor is in serious doubt after he was
forced to pay back money he wrongly claimed through Commons expenses and
Gordon Brown repeatedly refused to back him.

Mr Darling, who in an interview appeared to concede that he was about to be moved, is expected to be sacked from the Treasury as part of a reshuffle as early as this week.

The Daily Telegraph was told On Monday that Mr Brown is considering teaming Ed Balls with Shriti Vadera, both former advisers to him at the Treasury and now members of the Government.

The new set-up at the Treasury would see Mr Balls, the Schools Secretary, as Chancellor of the Exchequer.

On Monday, following disclosures by The Daily Telegraph, Mr Darling agreed to return £668 to the taxpayer after admitting that he claimed public money on a London flat for a period when he was living in a grace-and-favour apartment in Downing Street.

The Chancellor initially insisted that he had done nothing wrong and was backed by the Prime Minister. Later, Downing Street admitted that Mr Darling was paying back money to avoid "ambiguity".

By Monday night the Chancellor, in a television interview, finally said that he "unreservedly" apologised for his actions. He said he did not want to be seen to have made "any gain" from the situation. He also appeared to have resigned himself to being moved in a reshuffle.

"It's up to the Prime Minister. He's got to decide the team he wants to be the next government,'' he said. "Gordon and I work very, very closely together, but at the end of the day it is his call."

The Daily Telegraph has disclosed that Mr Darling claimed expenses for a flat that he had let to tenants while also claiming living allowances for his grace-and-favour home in Downing Street.

It followed disclosures that the Chancellor – who has repeatedly "flipped" his second home designation – used taxpayers' money to pay the stamp duty on a property deal and to pay an accountant to complete his tax return. He will repay the value of the £1,004 service contract covering September to December 2007.

Mr Brown is planning a reshuffle either on Friday or at the beginning of next week after what are expected to be humiliating local and European election results.

However. he appeared to seal Mr Darling’s fate yesterday. Asked three times if Mr Darling would still be Chancellor in 10 days’ time, Mr Brown refused to back his friend.

Three times the Prime Minister spoke of Mr Darling’s job in the past tense, saying: “Alistair Darling has been a great Chancellor.” Mr Darling’s office initially denied the Telegraph’s claims and said they had not been given time to respond, despite the details being put to the Treasury at 3pm on Sunday.

When the Telegraph story appeared, a spokesman for the Chancellor insisted that Mr Darling had done nothing wrong, saying that he had made “no further claims” for the flat after September, 2007.

Mr Brown echoed that position in a BBC radio interview at 8.10am Monday morning, insisting that the Chancellor had assured him there was “no foundation” to the Telegraph story. Yet less than two hours later, Mr Darling issued a statement saying he would refund money to the taxpayer.

Opposition parties seized on the confusion.

David Cameron, the Tory leader, said: “In the case of the Chancellor, he is clearly in serious difficulties. I think what matters is that the Prime Minister either backs him or sacks him. I think this just leaving him hanging out to dry is very bad.”

Meanwhile, Jim Devine became the latest MP referred to the party’s “star chamber” over his expenses.

The National Executive Committee’s special endorsements panel will “urgently” consider whether Mr Devine should be allowed to stand for parliament again.

The Livingston MP is facing allegations that he submitted receipts for work from a company that may never have existed. He has denied any wrongdoing.

A Labour Party spokesman said: “Jim Devine has today been referred to the special NEC endorsements panel for urgent consideration.

“The panel will report back as soon as possible with recommendations to the Organisation Committee of the NEC on whether to remove Jim Devine’s endorsement to stand for election as a Labour Party candidate.”